Gold News

Gold Dips from Record Highs vs. All Currencies as Tokyo Shares Sink, Commodities Surge

Gold Prices dipped into the London opening on Friday after holding in a $5 range overnight, slipping below $859 per ounce after another day of all-time record highs.

"Gold has been pushed to record highs by oil up at $100 a barrel and fears of a recession," reckons Sasha Naryshkine, an analyst at Vestact in South Africa.

"An added investment boost is the weak Dollar," adds Reuters today, "which means Dollar-denominated gold is relatively cheaper in other currencies."

But pricing gold in Dollars is merely a convenience for the global investment business – and Gold Prices in all currencies barring the Japanese Yen now stand at all-time records, too.

British investors Buying Gold at BullionVault on Thursday saw it breach £439 bid in Zurich. For French, German and Italian investors, the Gold Price in Euros touched €589.50 per ounce, a rise of 21% from this time in Jan. '07.

"With the clear breach of $850 we could well see $900 as the next target and that could be taken out quite soon," said Phillip Klapwijk, head of the much-respected GFMS consultancy, to Miningmx yesterday.

"It becomes bit of a momentum trade now, and if people see this all-time high beaten you could see people set their sights on $900 and rally up to that level as an initial target."

With the Gold Price in Dollars gaining 8.5% in the last month alone, several analysts now advise caution. "Any downturn could quickly accelerate due to protective sell stops that could be triggered from traders who have taken out their long positions during the most recent stages of the rally," says today's market note from the Chicago Board of Trade (CBOT).

"We are concerned that gold is vulnerable to a nasty correction," says John Reade at UBS in London. "After all, we consider the metal to be $100 to $150 per ounce above near-term fundamental value.

"The current Gold Price is not supported by supply and demand fundamentals," Reade believes, despite the continuing dearth of large new gold-mining deposits and soaring jewelry demand in China and South-East Asia.

"Short-term price corrections aside," says Kevin Norrish at Barclays Capital, "we would view these in the context of what remains a strong medium-term uptrend for gold.

A pullback in the Gold Market to $850 or below would represent a significant "buying opportunity" says Robin Wilkin, technical analyst for currencies & commodities at J.P.Morgan.

In the broader financial markets, Tokyo stocks sank 4% to reach a 17-month low as the Yen held near one-month highs vs. the Dollar, making Japanese exports more expensive for US and Dollar-pegged consumers in Asia.

Gold futures traded at the Tocom for delivery in Dec. '08 ticked ¥5 lower to ¥3,055 per gram – equal to $868.94 per ounce.

The Euro held in a tight range vs. the US Dollar at , meantime, while the British Pound added half-a-cent to $1.9765 on news that borrowing by UK consumers rose 8.8% in Nov. from a year before – slower than Oct.'s 9.1% but in line with analyst forecasts.

Borrowing by financial businesses including stock brokers and hedge funds rose 23.8% year-on-year, ahead of the 12-month average and nearly twice the pace averaged over the last decade.

US crude oil for delivery in Feb. added 11 cents this morning to $99.27 per barrel, while copper and zinc both rose "limit up" in Shanghai, causing a temporary break in trading after gaining 4% for the session.

Soybean futures hit a fresh 34-year high, rising for the third day running alongside corn and wheat. US government bond prices ticked lower, pushing the 10-year yield one basis-point higher to 3.90%.

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Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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